So what are TIPS? How to buy TIPS (Fidelity & Treasury Direct)? Treasury-inflation protected securities (TIPS) – this video will walk you through:
1:30 Detailed examples of how treasury inflation bonds work
6:00 What happens to treasury inflation protected bonds when there is inflation vs deflation
8:38 The pros & cons of buying TIPS as well as some key differences/ similarities between TIPS vs i-bonds
12:55 How to buy TIPS directly – focusing specifically on how to buy TIPS on Treasury Direct, how to buy TIPS on Fidelity & why/ how to buy TIPS in IRA
27:10 How many TIPS we own in our personal portfolio AND
why we chose to buy TIPS (or not)
👉👉 UPDATE/ CORRECTION 15:55 – 17:20: “YOU NEED TO PLACE YOUR ORDER BETWEEN THE ANNOUNCEMENT DATE & THE DAY BEFORE THE AUCTION DATE.”
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LEARN MORE ABOUT: Treasury Inflation Protected Securities
REVEALED: Best Investment During Inflation
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Tips, or Treasury-Inflation Protected Securities, are a type of investment option that can provide a hedge against inflation. In essence, they are bonds that are issued by the US government and are designed to protect investors from the effects of inflation. Here we will discuss what tips are and how you can purchase them through Fidelity and Treasury Direct.
What Are Tips?
Tips are a type of government-issued bond that provides investors with an inflation protection hedge. They are designed to adjust for changes in inflation by increasing the principal value of the bond. This means that even if inflation increases, the value of the bond will not be eroded.
The interest rate paid by tips is fixed, but the principal value of the bond will change based on the Consumer Price Index (CPI). This means that if inflation increases, the principal value of the bond will increase, and if inflation decreases, the principal value of the bond will decrease.
Tips are considered to be very low-risk investments because they are issued by the US government, which is considered to be one of the most stable and reliable governments in the world.
How To Buy Tips Fidelity & Treasury Direct:
Fidelity:
1. Open a Fidelity account: Visit the Fidelity website and create an account if you haven’t already. You will need to provide some basic personal information to get started.
2. Research tips: Once you have created an account, you can start researching tips by clicking on the “Trade” tab at the top of the page and selecting “Fixed Income.”
3. Select the tips you want to buy: Once you have decided which tips you want to purchase, you can select them and then click on the “Trade” button.
4. Purchase the tips: Follow the prompts to complete your purchase. You will need to provide your payment information and confirm your order.
Treasury Direct:
1. Open a Treasury Direct account: Visit the Treasury Direct website and create an account if you haven’t already. You will need to provide some basic personal information to get started.
2. Research tips: Once you have created an account, you can start researching tips by clicking on the “Buy Direct” tab at the top of the page and selecting “Treasury Inflation-Protected Securities (TIPS).”
3. Select the tips you want to buy: Once you have decided which tips you want to purchase, you can select them and then click on the “Buy” button.
4. Purchase the tips: Follow the prompts to complete your purchase. You will need to provide your payment information and confirm your order.
In conclusion, purchasing tips can be a great way to protect your investments from the effects of inflation. Through Fidelity and Treasury Direct, you can easily purchase tips and take advantage of their inflation protection benefits. Remember to do your research and choose the tips that are right for you.
-just spectacular explanations.
how about a video on tips and bond index funds
Does TD Ameritrade sell new issue TIPS? I did not find it, but it might also be because there is no auction scheduled right now. And for the tax complications, it is just one more 1099 INT and one more 1099 OID each year? If so it is not terribly difficult as long as Treasury Direct or the brokerage send over those 1099s and I do not need to calculate the principle adjustment and dividends myself…
i love your lipstick! and your tips!
Are the next round of 5-Year TIPS expected to carry the around the 1.65% fixed rate like the last?
What is inflation factor? How does it play a role on my decision making?
Good vid….but what happens to the TIPS real return when food, energy, transportation and housing are pulled out of the CPI? Supercore or Supershaft?
I would prefer a guaranteed rate of interest of 5 plus percent through a MYGA or 4.5 to 5 percent with a bank CD
I do like IBonds however
It should be clear to prospective TIPS buyers that because they are sold at auction, the par value is not the price you pay. I bought $2500 TIPS and paid $2737.85.
Also, the tax reporting is daunting, in part because TreasuryDirect's information pertaining to these bonds is less than complete.
Nicely done video in all.
Didn't really explain why you would buy Tips vs. Treasuries. You mentioned that if had " a million dollars" you may go with TIPS since there is no limit; however, why not T-bills or notes since they also don't have a limit.
very clear and detailed explanation, just what I needed, thank you
Seriously, I wish I would have found your YouTube channel earlier. I guess better late than never. Thanks for all the great information!
made request for 20000 tips treasury direct they withdrew 20500 from my bank then recorded that i had 20000 in tips What do I not understand on this transaction I seem to have lost 500 buck
So, in the long term, it would appear TIPS are generally superior to I bonds. With I bonds, interest is linked to the CPI-U, but you must pay federal taxes on redemption, so you effectively did NOT keep up with inflation. With TIPS, your principal is linked to the CPI-U, but you also get an interest payment on top of that, which offsets some of the federal taxes you'll need to pay, which makes it slightly better than I bonds. That's how I'm seeing it anyway. Or am I wrong? The drawback is the potential risk of loss if you need to sell early on the secondary market.
I don't understand the use TIPS play in an overall portfolio or retirement plan. From 2010 to 2020 the inflation rate was under 2%. That seems like not such a good return on your investment. Am I missing something?
I did not understand why the value of TIPS go down when the interest rate goes up. It is a good thing for TIPS, right, if the interest rate goes up, you get more money back. Then, why does its value goes down in the secondary market?
The name of the game is the preservation of capital.
Very good education to us! I've learned a lot! questions, the inflation's rate is changed according to the actual rate or it is fixed at 3%? what it is the rate of last month's TIPS if it is changed? Thanks so much!
In case anyone is interested, I recently moved some extra cash into a Credit Karma Money (MVB Bank) online savings account while waiting out the first of the year to purchase another I Bond. The interest rate right now is 2.73%… vs the 0.01% I'm getting on my accounts at my regular bank.
Thank you for your clear and concise step-by-step primer….
Might you cover TIP ETF's and if DRIP on them is wise right now?